Mr. Speaker, this fiscal year the government is making a significant change in how it presents its budget and financial information. In accordance with the recommendations of the Public Sector Accounting Board, all Canadian governments are expected to report on the value and accumulated depreciation of their tangible capital assets such as schools, highways and hospitals. Up to now, the value of these assets has not been reflected in our books. In the words of the Auditor General of Canada when speaking on this matter in relation to the federal government, I quote:
"The biggest problem with the way the government has kept its books for 130 years is that it did not give the information needed to manage assets and plan for the future. We cannot delay further -- we are just catching up to 20th century practices as we enter the 21st century."
The Government of the Northwest Territories is proud to be among the leading jurisdictions in the implementation of these new accounting guidelines. We firmly believe they will lead to better planning and greater transparency in government operations. We are also using this opportunity to enhance our budget presentation to include cash and debt forecasts in addition to our traditional forecasts of surpluses and deficits. We believe this additional information will provide the public with a more thorough understanding of government operations.
Mr. Speaker, because the technical aspects of these accounting changes require more explanation than I can provide in my speech, we have included in the budget documents a full explanation and reconciliation to former accounting practices. In addition, we are offering briefing sessions to the media and other interested groups.
The 2000-2001 budget anticipates operating expenditures, including supplementary appropriations and lapses, of $763.6 million. Total revenues are estimated to be $751.3 million. This represents an expected operating deficit of $12.3 million. We also expect to make investments in additional tangible capital assets of $54 million during the 2000-2001 fiscal year.
When the operating deficit of $12 million and the undepreciated value of our investment in capital assets are taken into account, we expect an accumulated surplus position at the end of 2000-2001 of $843 million. Contributing to the $843 million accumulated surplus is the net book value of our capital assets at $846 million.
As Members are well aware, Mr. Speaker, we find ourselves in a deficit situation because our revenue growth has been, and is expected to continue to be, insufficient to meet the growing needs of our residents for programs and services. Having said this, we are expecting our revenues in 2000-2001 to be slightly higher than originally forecast. We are encouraged that the Northwest Territories population is growing again, after the decline experienced in 1998. However, our rate of population growth is still lower than that of Canada, and this translates into very little growth in the Formula Financing Grant. One-time federal funding of $8 million provided through the Canada Health and Social Transfer (CHST) and $5 million for prior years' nurses salary adjustments will help boost this year's revenues. In addition, we will receive funding from Canada of about $13 million to compensate for the increased pension costs imposed on us by changes to the federal Public Service Superannuation Act.
We are also expecting a substantial increase in our tax revenues over last year. Even though a portion of this increase is due to one-time adjustments for previous years, we anticipate that economic activity associated with resource development will translate into a higher tax base for this government. However, under our current fiscal arrangements with Canada, the GNWT will only benefit from about 20 per cent of this increase.
On the expenditure side, the program and service needs of our residents are forecast to continue to grow more quickly than our revenues. The demands on our expenditures are driven by a number of factors:
- • Our demographics are a challenge -- we have a large population of young people who need education, jobs and housing. At the same time, those over 65 years of age are the fastest growing segment of our population. We know, therefore, that we will face increasing pressures on our health care system and on our programs for the elderly;
- • We have pressing needs for capital infrastructure -- our highways and our basic community infrastructure, such as water and sewer, are badly in need of significant investment. This investment cannot be deferred indefinitely, especially in light of the need to attract further investment in resource development and ensure that we maximize the opportunities presented by our non-renewable resources;
- • The health needs of our population are of serious concern -- although there have been substantial improvements over the past 15 years, we continue to lag behind national averages in many key areas; and
- • We need to respond to the serious social challenges of the Northwest Territories - we need to address the underlying causes of issues such as substance abuse and other unhealthy choices which result in family violence, high crime rates, and fetal alcohol syndrome and fetal alcohol effect. If we do not, future governments will face even higher costs in dealing with these issues.
We cannot solve our problems simply by cutting expenditures. In 1995 and 1996, faced with a unilateral $55 million federally imposed cut to our Formula Financing Grant, the previous government of the 13th Assembly reduced spending significantly. Departments were combined, wages were reduced, hundreds of staff were laid off, capital spending was cut and services were reduced. However, these cuts did not solve the fundamental problem of the growing gap between our expenditures and revenues.
If we are to act as responsible fiscal managers, it is necessary to look at our expenditures to ensure that we are getting the best value for our dollars. A number of reviews have been initiated within the government to determine if there are areas where it makes sense to reduce spending:
- • We are conducting a broad review of all government programs and functions. It is necessary to know if there are ways we can do things better, or if there are things we should no longer be doing; and
- • We are also reviewing some specific areas such as government purchasing, energy use, and subsidies, to ensure spending is effective and efficient.
Finally, we are reviewing potential sources of additional revenue, including taxation.
I want to assure the public and the members of the public service that we are not looking either at wholesale cuts to programs and services or at large-scale layoffs as the solution to our fiscal situation. Making cuts to essential services will likely cost us much more in the future in terms of health and social problems.
Mr. Speaker, although major cuts to basic services are not considered wise, we must all temper our expectations of what the Northwest Territories government can afford to do. This includes our departments, our boards and agencies, our contribution recipients, our public sector unions and our program and service clients.
In Towards a Better Tomorrow, the 14th Assembly has identified four key priorities for the next four years. It is on these priorities that the work and resources of this government will be focused. We will make investments where we are able, just as the previous government made key investments in the diamond value-added sector, and in providing support to oil and gas activity, because they knew these investments would pay off.
However, our fiscal resources are limited. We know that substantial revenues will be generated from the development of our non-renewable resources. But it is only when Northerners gain control over the pace of development and receive the fiscal benefits of that development, that we will have the means to reach our goals.